Vuzix Corporation

Greetings and welcome to the VUSIC second quarter ending June 30th, 2025 financial results and business update conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. Now, I would like to turn the call over to Ed McGregor. director of investor relations at Vuzix. Mr. McGregor, you may begin.

Good afternoon, everyone, and welcome to the Vuzix second quarter 2025 ending June 30th financial results and business update conference call. With us today are Vuzix CEO, Paul Travers, and our CFO, Grant Russell. Before I turn the call over to Paul, I would like to remind you that on this call, Management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements during the question and answer session. Therefore, the company claims the protection of the safe harbor forward-looking statements that are contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those contemplated by any forward-looking statements as a result of certain factors, including but not limited to general economic and business conditions, competitive factors, changes in business strategy or development plans, the ability to attract and retain qualified personnel, as well as changes in legal and regulatory requirements. In addition, any projections as to the company's future performance represent management's estimates as of today, August 14, 2025. BUSICS assumes no obligation to update these projections in the future as market conditions change. This afternoon, the company issued a press release announcing its 2Q 2025 financial results and filed its 10Q with the SEC. So participants on this call who may not have already done so may wish to look at those documents as the company will only provide a summary of the results discussed on today's call. Today's call may include certain non-GAAP financial measures. When required, reconciliation to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found on the company's filings as sec.gov, which is also available at www.vuzix.com. I will now turn the call over to Vuzix CEO, Paul Travers, who will give an overview of the company's operating results and business outlook. Paul will turn the call over to Grant Russell, Vuzix CFO, who will provide an overview of the company's second quarter results, after which we will move on to the Q&A session. Paul?

Thank you, Ed. And thank you to everyone joining us today. I'd like to start with a few select Q2 highlights. As you know, and representing a great milestone and statement about Vuzix's ability to manufacture waveguides in volume, Vuzix has met all the manufacturing and performance gates tied to the second Quanta tranche and received a further $5 million in equity, bringing Quanta's investment thus far to $15 million of a planned $20 million total. I will share a bit more on this shortly. We have also commenced volume shipments of waveguides to our first OEM waveguide customer, and alongside that, we have formally engaged with multiple new Tier 1 OEM waveguide customers spanning enterprise to the broad markets. And just this week, we have announced the new LX1 Enterprise Smart Glasses focused on warehousing and logistics with integrated voice and vision workflows. Initial customer sampling is underway, and a production rollout is scheduled for Q4 with strong initial demand and interest across our existing customer base. Why do these events matter? Our strategy is simple, and these proof points show its execution. We plan to monetize the enterprise market and scale OEM waveguide optics for AR and AI-driven smart glasses across the even broader consumer markets in parallel. And this strategy is driving multiple and sizable market verticals for Vuzix. We're enabling enterprise customers to rethink frontline workflows and accelerate the digital transformation that is at the forefront of the integration of AI and the future of work. We're engaged with multiple prime defense contractors to design and support the next generation of see-through wearables. And we're on the ground floor to participate in a global evolution from consumer smartphones to AI-driven smart glasses. This strategy is also leading towards a growing base of ODM and OEM customers, including strategic partners like Quanta, who will rely on our scalable waveguide capabilities to power their own smart glasses and HMD solutions for their customers. Looking ahead, our vision is to power the future of these connected smart glasses with waveguides at their core. The collective opportunity is considered massive in both units and dollar terms, and we intend to participate in a very material way as we scale with disciplined and capital-efficient growth. For OEMs, the metrics that matter most to them when selecting key technology component suppliers are clear. High volume and cost-effective manufacturing. Strong yields and consistency at scale. Vuzix is demonstrating exactly that. proving we can meet the quality, volume, and cost targets essential for global AI-driven smart glasses adoption. These capabilities have been acknowledged not just by Quanta, but soon also by multiple ODM and OEM partners, reinforcing our leadership and scalable AR optics. Our ability to deliver new and customized waveguide prototypes with turnaround times far shorter than others gives us a unique edge. This isn't just about designing a single product or one-off engagement. It's ultimately about a long-term platform strategy. We are engaged currently in joint product development, co-marketing, and integrated supply chain initiatives with several entities, positioning Vuzix as a core component supplier of next-generation waveguides. We are often asked whether Vuzix is or will be inside a specific pair of smart glasses. The truth is, many of the brands you know, spanning tech companies, fashion houses, and consumer electronics leaders, are now attempting to develop and introduce smart glasses. And our goal is to supply waveguides to as many of them as possible. Crucially, Quanta, a $35 billion market cap company, already manufactures and supplies ODM slash OEM products for nearly every major player in the Western world. Partnering with them give Uzix a powerful entry point into broad consumer markets. And while we respect Quanta greatly, we are also now engaged with some of their competitors directly as well that have been approached by their respective OEM customers for solutions. With partners like Quanta and other leading ODMs and OEMs, we feel we are entering the market at exactly the right time with scale, proven manufacturing, and reference designs ready to go. The AR smart glasses ecosystem is aligning. Consumer and enterprise users' behavior is already shifting, and smart glasses are next. And Vuzix waveguide optics, we feel, are positioned to power the coming wave. In Q2 2025, Vuzix received $5 million tied to the second tranche of Quanta Computer's investment contract, again bringing their total commitment to $15 million thus far out of a planned 20 million. Importantly, this tranche was tied to actual manufacturing performance, not forecasts. We were required to demonstrate specific yield and volume capacity thresholds under real production conditions, and we have exceeded their expectation. Qantas set key production yield gates, and from the very first runs, we delivered yields far north of their expectations with high run-to-run consistency. Our waveguides also met or surpassed all required performance metrics, including contrast, haze, brightness, efficiency, and production run rates. And last, but certainly not least, from a financial perspective, we're hitting target price points that will produce strong production margins for Vuzix at scale. We believe we have now also satisfied all the technical gates required for the final tranche investment of $5 million from Quanta and anticipate receiving funding as per the stock purchase agreement. I would like to add that Quanta is more than a strategic investor. They're a world-class manufacturing partner with a proven track record in high-volume production. Together, we're advancing multiple new programs built around Vuzix WaveGuides, all targeting large deployment opportunities. This relationship is shaping our go-to-market and scaling strategy. It enables us to quickly commercialize at scale, efficiently, reliably, and profitably. By leveraging Qantas infrastructure, we can remain capital-efficient and focused on core innovation, while accelerating production to meet the growing demands of our customers. We are seeing enterprise adoption re-energized as AI and AR capabilities and use cases are emerging fast across logistics, remote support, training, manufacturing, and quality assurance. AI is transforming smart glasses into assistants in the workplace, but it can't solve problems unless it has a feel for what the problems are in front of the worker. With our smart glasses with see-through waveguides, we are building that ideal platform. Think about cool yet simple applications like taking a picture with smart glasses. That is nothing. When AI is integrated directly into these devices, their potential to enhance real-time decision-making and productivity in the workforce is game-changing. As skilled labor shortages grow due to retirements and shrinking talent pool, AI-enabled smart glasses will become critical tools for augmenting workers in complex hands-on roles. Enterprise stands to benefit significantly as these devices streamline operations, reduce training time, and boost overall efficiency. Take the automotive industry, for example. A vertical where we see great potential for smart glass is usage. If you took a deep dive today, you would be surprised by what a large percentage of a car is built by human hands. I know they show robots on the outside of cars, painting them and welding them. Sure, those bigger, bulkier functions are jobs for a robot. But if you visit some of the largest car companies on the planet and ask them what percentage of their final manufacturing is done by a human, they will tell you it's far north of 80%. The problem today is that they're expecting human beings to do more and more And how do they do that if they don't have the proper training and support that a pair of AI-driven smart glasses can provide? There simply are limits to human capacity. And by using AI, those limits get significantly lifted by having AI agents to help. Within warehousing and logistics, automated robotic systems can excel at handling routine tasks. with predictable outcomes but struggles when faced with exceptions. Human-in-the-loop automation is a hybrid approach where automated systems and human judgment are integrated into a single workflow. In this workplace instance, a worker is equipped with vision-picking smart glasses, like Vuzix's new LX1, that can outperform traditional voice-only systems, especially in complex, loud, or high skew count and high velocity picking environments. The warehouse labor market has also reached a crossroad in recent years. Turnover in the warehouse rolls often exceeds 30% annually. Skilled pickers are in short supply, and aging workforces alongside overall rising labor costs will accelerate the adoption of assistive tech including AI-driven smart glasses. The LX1 announced earlier this week was specifically designed to meet the evolving demand of the warehousing and logistics voice-picking industry, which according to research analyst firm Markets and Markets is estimated at approximately $6 billion in 2024 and could be $25 billion by 2034. This expected phenomenal growth falls squarely on top of the human-in-the-loop automation, which is one of the largest and fastest growing market opportunity segments in supply chain today. Let me add, we have customers coming to Vuzix that are searching for alternatives to their antiquated pick-by-voice solutions. The LX1 features integrated voice control and visual access to real-time information that allows warehousing operators to get the best of both worlds voice, and vision-based systems. The LX1 is rugged and purpose-built to stand up to the physical demands of modern logistics environments, all while supporting a single shift on a single charge. Quanta is our manufacturing partner for the LX1, and it extends our growing relationship with Qualcomm. Select end customers and ISVs are already getting their first samples of the LX1. which will be in production and available more generally to enterprise customers before the end of the year. The Vuzix Software Solutions Group, formerly Movient, has a growing pipeline of recognizable brands and logos operating in traditional logistics markets and with comprehensive workflows. Initial implementations are already showing strong and in some cases remarkable operational gains and productivity improvements in certain warehouse applications, highlighting our going-in leadership position in AI-enhanced enterprise solutions. As we look at the future of smart glasses, I like to think of it a bit like the early automotive industry in the late 1800s. Back when cars were just emerging, there were countless small makers in a wild frontier of innovation before the industry took shape, and before that, there were many years of horse and buggy. Today, the smart glasses world feels somewhat like that. Many players, big and small, all trying different approaches. Even giants like Microsoft with the HoloLens or Magic Leap with billions in funding have stepped in and stepped out of the smart glasses industry. Yet here we are, Vuzix, a smaller company, still standing out and going strong. Our enterprise side is sitting in a great spot, and we are carving our own path in this new frontier, just like those early automotive pioneers who eventually reshaped the world. And if we think about how the smart glasses industry has evolved, there's another important parallel. For a long time, smart glasses were almost like an experiment. People weren't sure what to expect. They were feeling out what might work. But now, after years of learning, and listening to real-world feedback, and with the amazing capabilities of AI, the landscape is changing. We've got customers who know exactly what they need and who have helped shape products like the LX1 to be a true solution, especially in the warehouse space. It's like the moment when people realized they could afford a car and it wasn't just a novelty. It was something that could change how they worked and lived in the same way the LX1 isn't just another pair of smart glasses. It's a tool built from the ground up with real customer insight, and it's a sign that we've reached a turning point where these devices are truly ready for prime time. And with our capabilities in design and manufacturing of the critical waveguides needed, customer market opportunities and partner engagements across enterprise, defense, and consumer continue to mature and expand. Our target markets are large, and innovation and investment in these markets by many entities continues to accelerate. In defense, we have numerous programs in flight with prime defense contractors and other brands to deliver waveguide and display technologies that are going into next-generational products and head-worn devices to support drones, radar surveillance, commercial and industrial aircraft, commercial products, and even ultimately in consumer products. For the broader markets, our relationship with quantum remains central, but we have recently added Hymax as a development partner and are advancing collaboration discussions with numerous other ODMs and projection makers. Let me conclude by stating that we believe that a structural inflection point is finally at hand for Vuzix and the industry in general. The investments, time, and energy we've made to date across these verticals have positioned us for an era of growth that we believe will ultimately be game-changing for the world, our financial results, and market valuation. With that, I'll turn the call over to Grant for the financial overview. Grant?